INDIAN INSTITUTE OF MANAGEMENT AHMEDABAD INDIA Research and Publications Indian Antecedents to Modern Economic Thought Satish Y. Deodhar W. P. No. 2018-01-02 January 2018 The main objective of the working paper series of the IIMA is to help faculty members, research staff and doctoral students to speedily share their research findings with professional colleagues and test their research findings at the pre-publication stage. IIMA is committed to maintain academic freedom. The opinion(s), view(s) and conclusion(s) expressed in the working paper are those of the authors and not that of IIMA. INDIAN INSTITUTE OF MANAGEMENT AHMEDABAD-380 015 INDIA IIMA INDIA Research and Publications Indian Antecedents to Modern Economic Thought Satish Y. Deodhar* Abstract The history of economic thought begins with salutations to Greek writings of Aristotle and Plato. While the fourth century BCE Greek writings may have been the fount of modern economic thought that emerged in Europe starting 18th century CE, there has been a general unawareness of the economic thinking that emanated from the Indian subcontinent. Pre-classical thoughts that had appeared in Vedas dating a millennium prior to the Greek writings had culminated in their comprehensive coverage in the treatise Arthashastra by Kautilya in the fourth century BCE. In this context, the paper outlines various ancient Indian texts and the economic thoughts expressed therein, delves on the reasons why they have gone unnoticed, brings to the fore the economic policies laid down by Kautilya, shows how these policies exemplify pragmatic application of the modern economic principles, and brings out in bold relief, the contribution of this Pre-Classical literature in the history of economic thought. Key Words: Ancient Indian Texts, Arthashastra, Economic History, History of Economic Thought, India, Kautilya, Political Economy, Sanskrit, Tamil, Vedas JEL Classification: B11, B15 _________________________ *Professor of Economics, Indian Institute of Management Ahmedabad (IIMA), Vastrapur, Ahmedabad, 380015. W. P. No. 2018-01-02 Page No. 2 IIMA INDIA Research and Publications Indian Antecedents to Modern Economic Thought 1. Introduction Economics is a relatively young science as compared to other physical sciences. Throughout much of the period of Roman Empire, the Dark Ages in its aftermath (TAE, 1883), and the spread of Inquisition; no significant contribution was made to the subject of economics in the western world. As described by Ingram (1919), the long period was characterised by Roman military ambitions, slavery ascending into serfdom, rise of religious crusades, and, lack of an energetic exercise in economic thought. Europe had to wait almost for millennia and half until renaissance, protestant reformation, and enlightenment, in that broad order, created a congenial environment for the new thinking (Weber, 1905). It was in this new environment that in the late eighteenth century Adam Smith (1776) wrote his treatise, An Inquiry into the Nature and Causes of the Wealth of Nations. In this treatise, Smith could replace the Greco- Christian doctrines with a system that combined moral living and reasonable pursuit of material desires (Fitzgibbons, 1995). Of course, Smith and his close contemporaries – philosophers and thinkers of political economy, did not begin to ponder over their new economics, now christened as Classical Economics, out of vacuum. Looking beyond mercantilism and the dark ages, the fount of their inspiration was the pre-Roman Greek thinkers of Europe such as Aristotle, Socrates, and Plato who wrote on political economy matters. The word ‘economics’ comes from the ancient Greek word oikonomia, where oikos means house and nomos means custom or law (Eatwell, Milgate, and Newmann; 1987). Circa fourth century BCE, Aristotle wrote the treatise titled Oikonomiokos, which roughly translates into English as the rules of or the management of household. Smith was particularly impressed by Aristotle’s defence of private property and his critical view on Plato’s communism. The continuity of this ancient western legacy, albeit with a millennial gap, gets reflected in current economic writings. For starters, textbooks on principles of economics introduce the prefixes micro and macro referring to their Greek meanings, small and large, respectively. Importantly, literature on development of economic thought acknowledges the contributions of the Greek scholars, and justifiably so. For example, if Cossa (1893) and Ingram (1919) introduce the economic ideas of the Greeks in about ten pages, Haney (1911) spends an entire chapter on Greek contribution. Similarly, Roll (1973) devotes an entire section on Greek antecedents in Chapter I of his book titled, A History of Economic Thought. In recent times, Mark Skousen (2016) makes reference to Aristotle and Plato in Chapter I of his book titled, The Making of Modern Economics. References to ancient non-western antecedents, however, perhaps with the exception of Haney, do not find a mention in the literature on history of economic thought. This is either because the references to non-western contributions were not available; and/or the development of those antecedents happened independently and their link and continuity to modern economic literature did not exist; or W. P. No. 2018-01-02 Page No. 3 IIMA INDIA Research and Publications simply, the contributions did not exist. Perhaps, the perception of the latter kind made Skousen write, that until the publication of Smith’s treatise, “six thousand years of recorded history had passed without a seminal work on the subject that dominated every waking hour of practically every human being.” This sweeping impression may read a bit exaggerated, once we consider some of the ancient writings originating from the Indian subcontinent. Spengler (1971) has covered the Indian literature spanning from the ancient and the medieval to the colonial and the modern times; however, it gets spread thinly over the entire period and the work on ancient Indian literature is from secondary sources alone. Similarly, in the recent past, Waldauer, Zahka, and Pal (1996); Sihag (2009); and Skare (2013) have also contributed to the literature. However, their work focuses only on a particular treatise, Arthashastra by Kautilya, and is based on secondary sources. In these studies, Arthashastra gets treated as a one-off text without juxtaposing it as a seminal improvement and collation of previous works. These studies do not conjecture the reasons as to why ancient Indian literature on economic matters got overlooked and how the western world got exposed only to the otherworldly features of Indian thought. I address these issues in this paper. Moreover, this paper takes a comprehensive perspective on Indian economic thought leading upto Kautilya, highlighting the broader spread of economic writings prior to Kautilya as also the political economy aspects espoused by Kautilya. I focus attention not just on secondary sources but on quite a few original sources and their English translations. And, in doing so, wherever possible, I give parallel references to occidental thinkers of the respective times. Towards this end, in Section 2, I introduce the ancient Indian texts in general, refer to the literature concerning economic aspects in particular, and provide reasons for the inattention it received. Thereafter, in the Section 3, I give examples of what I call Pre-Classical economic thought emanating from some of the ancient Indian texts dating back to 1500 BCE, and, in Section 4, I bring to the fore, the economic thought and policies as prescribed in the fourth century BCE treatise on political economy – Arthashastra, by Kautilya. Finally, concluding comments are made in Section 5. 2. Ancient Indian Literature Although separated in time and space, and against popular perception, practical observations, societal laws, and thoughts on economic matters were being written in the Indian subcontinent as much as the otherworldly concerns. Written mostly in Sanskrit, some of this literature spanned beyond a couple of millennia BCE. For example, Rig-Veda, one of the premier religious texts originating in India dates back at least to 1500 BCE (Violatti, 2013). For want of good writing materials and its durability in those times, such texts were composed using terse metrical verses and passed-on to future generations through memorization. In fact, there are four different kinds of Vedas and most were orally composed in the third millennia BCE (Vinod, 2012), before being written down between 1500 BCE to 600 BCE. This literature is referred to as Apaurusheya and Shruti literature, which means that there is no single author to these scriptures and the compositions are a collective knowledge of many sages as was revealed to and by them. Similarly, the Indian W. P. No. 2018-01-02 Page No. 4 IIMA INDIA Research and Publications epics Ramayana and Mahabharata were composed prior to 500 BCE. Moreover, there are other texts referred to as Dharmashasthras, which are considered as Smrutis, i.e., those that are written by individuals to serve as manuals of behaviour for the society. About six Dharmashastras are known to have been written over a period from 600 BCE to 200 AD, the latest one being called as the Manu Smruti. While Vedas are the sacred texts, Dharmashastras were written as guides for the smooth functioning of society. If there was any conflict between the two, Vedas would have to prevail (Radhakrishnan, 1948). Furthermore, there are six